Reality set in this week that the ‘goldilocks’ narrative is not compatible with the massive rate-cuts priced-in for next year.
As Goldman warned:
“…it may be hard to justify more than 75bp of cumulative easing without weaker growth. A recession could clearly motivate a much deeper easing cycle, but a high weight on that outcome is not consistent with other asset prices, or with our own central case.
…
For that reason, the market is moving into territory where we think it will become more difficult for US rates to rally unless the growth picture deteriorates more than we, and other markets, expect.”
Stocks mixed-ish, Bonds mixed-ish, Commodities down, Crypto up, & Dollar up as Rate-Cut hopes faded this week (from 140bps in 2024 to 112bps)…
Source: Bloomberg
On the macro side – it was all ‘soft’ with a little firming in ‘hard’ data: Inflation expectations (survey) down along with gasoline, Services (survey) data up, labor market mixed (JOLTS weak but unemployment lower), consumer sentiment (survey) soars, and geopolitical risk mixed (US pressures Israel for ceasefire but military action in Yemen looms).
Source: Bloomberg
Good news, bad news, no news; Didn’t matter as stocks…
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